2010-08-27 09:30

Insurer to decide on public float investment after issue pricing

BEIJING - China Life Insurance Co on Thursday reiterated that it has no plans to buy a stake in American International Assurance (AIA), a subsidiary of American International Group (AIG).

A woman walks past a China Life office in Beijing's Financial Street on Aug 25, 2010. [Photo/Agencies]

"We will decide on whether to subscribe to AIA's pending initial public offering (IPO) or not after the issue is priced," said China Life Chairman Yang Chao.

Yang said he has not been in talks with the top management of AIG. "I haven't contacted the top management of AIG about any potential strategic investment after we decided not to bid for AIA in March 2009," he said.

China Life Insurance, China Cinda, and privately held Fosun Group had earlier this month decided not to bid for a 30 percent stake in AIA as they felt that the IPO could be exorbitantly priced, said reports.

Industry sources, however, said Cinda Asset Management, Fosun Group and Hony Capital (an investment arm of Legend Holdings) are still in talks with AIG for possible investments in AIA. The nation's largest lender Industrial and Commercial Bank of China (ICBC) is expected to provide financing support for the consortium.

AIG is expected to decide by next week whether it wants to start formal negotiations with strategic investors for AIA's pre-IPO sale, Reuters reported on Wednesday, citing unnamed sources familiar with the process.

"According to my knowledge AIG has been trying its best to push forward AIA's IPO," Yang said.

"But it will be quite difficult for AIA to decide on pricing and other matters before the initial public offering due to the Hong Kong regulatory rules."

AIA plans to list its shares in Hong Kong during the fourth quarter and expects to raise nearly $23 billion.

Yang, however, did not rule out the possibility of being a strategic investor in AIA.

"Our investment in AIA will depend on market conditions, and we will prudently study the situation and wait for the IPO pricing," Yang said.

Meanwhile, the company said profit during the first six months ending June this year rose 7.4 percent on higher premium income. Net income for the period rose to 18 billion yuan ($2.7 billion) from 16.8 billion yuan a year earlier.

Net realized gains on investments fell by over 50 percent in the first-half after the market barometer plunged by 27 percent during the period.

"Opportunities coexist with risks in the second half, and we will adopt a more flexible approach to achieve periodical gains in the capital market," said Liu Jiade, vice-president of China Life.

At the same time the company plans to pursue new investment channels like infrastructure and real estate sector.

China Life will spend 100 billion yuan to set up retirement homes in Langfang, Hebei province. It will start the project with an initial investment of around 10 billion yuan. The company purchased a land parcel in Hangzhou for around 2.6 billion yuan earlier this month.

According to the China Insurance Regulatory Commission, insurers are allowed to invest up to 10 percent of their assets in real estate, but are forbidden from investing in the commercial residential sector and getting involved in property development.